Irish insurer FBD boosts capital via Fairfax investment

DUBLIN, Sept 16 (Reuters) - Canada's Fairfax Financial
Holdings is to invest 70 million euros ($79 million) in
Ireland's FBD Holdings in the form of a convertible bond
to bolster the general insurer's capital, the companies said on
Wednesday.

Last month Ireland's only publicly traded insurer laid out
plans to boost its capital and change strategy after a sharp
rise in first-half losses followed two profit warnings last year
and the resignation of its chief executive officer.

Fairfax, which was among a group of North American investors
that more than tripled a 2011 investment in Bank of Ireland
, will receive a 7 percent annual interest payment on
the 10-year bond, FBD said.

"This is a significant vote of confidence. It underpins the
board's strong commitment to maintain healthy capital buffers as
we prepare for the implementation of Solvency II," FBD's interim
CEO, Fiona Muldoon, said in a statement, referring to the
European Union's new capital requirements for insurers.

Shares in FBD, which have fallen by more than 50 percent in
the last year, closed up almost 9 percent at 6.82 euros
following the announcement.

The agreement is similar to the subordinated loan that Irish
state-owned health insurer Vhi Insurance took out with Warren
Buffett's Berkshire Hathaway this year.

"We have been a long-standing follower of FBD. This
investment underlines our belief in the strength of Ireland's
on-going economic recovery and in FBD's core franchise in the
farming and agri-business sectors," Fairfax Chief Executive Prem
Watsa said.

While Ireland's economy is growing faster than any other in
Europe, FBD has said it will only benefit in the medium term
because claims linked to increasing economic activity are on the
rise amidst a structural change to the sector, which it said
will lead to losses across the industry for 2015 and 2016.
($1 = 0.8868 euros)
(Reporting by Padraic Halpin; Editing by Greg Mahlich)